Late buying lifts US stocks modestly in a very quiet session, as the stock rally continues apace, while the Treasury market continues it recent sell-off, amid what seems to be a universal opinion that the US economy is getting better.
DJIA adds 40 to 11410, S&P 500 rises 7 to 1240, the latter up about 1.3% on the week. Technically, too, the week was a break-out for the S&P. Nasdaq Comp gains 21 to 2638, about a three-year high. NYSE volume, at more than 4B shares traded, actually is pretty good for a Friday during the holidays.
Ten-year yield, meanwhile, rises to 3.32%, near a six-month high. The general take on the Treasury sell-off is that it signals an improving economy; nobody’s very worried about an attack of the bond vigilantes. But if the economy’s so hot, why’s unemployment still so high? Everybody, and we mean everybody, is writing off last week’s jobs report as an outlier, a mistake even. It’ll get revised higher, we’re told.
Look, it may get revised higher. But it’s not going to get revised to 350,000 from 39,000. The front page of the Wall Street Journal said it all today: companies are sitting on their cash; they are not hiring. How’s that plug into your 2011 worldview?
It’s amazing how much all the big, honking risks in the world are being ignored by the markets, too. Europe, China, the US, nobody’s worried. But all three regions have issues worth worrying about. “The fiscal and sovereign credit problems in Europe are not going away,” Gluskin Sheff’s David Rosenberg wrote in his daily commentary. “Neither is the instability in the US state and local government sector. Policy tightening in China is also a source of uncertainty. Volatility is likely to intensify with this outlook.”
Everybody is writing off risk. That in itself is a screaming red flag, you ask me.